Total Cost of Ownership refers to the sum of the costs incurred by a product or service throughout its lifetime.
TCO was first used in the IT sector in the 1980s and was later adopted in other sectors.
Direct and indirect additional costs are often ignored when purchasing. This may bring temporary satisfaction with false information. However, correct decisions can only be made in the long term with Total Cost of Ownership Analysis.
When calculating the Total Cost of Ownership, the following items must be added in addition to the Initial Purchase Cost;
1. Pre-purchase costs
Portfolio work
On-site inspection
Sample run
Contract process
2. Purchasing process costs
Initial purchase price
Financing cost
Shipping cost (International/domestic)
Shipping insurance cost
Customs fee
Certificate / Passport fee
Cost of on-site quality control during the production process
Cost of expected time for delivery
3. Post-purchase costs (Time until use)
Preservation costs
-- If the material in question has not arrived in the required packaging conditions
The cost of returning damaged products and the resulting time without materials
VAT etc. incurred due to missing or incorrect documents. additional taxes* Additional labor and equipment costs incurred during unloading as a result of inadequate packaging or incorrect loading
Physical cost of keeping in stock
Financing cost of holding in stock
Waste due to expiration dates
4. Costs incurred during use
Additional consumption compared to its equivalent
Additional manufacturing costs compared to equivalent
-- Length of time for paint to dry
-- The obligation to be more meticulous and to have technical personnel compared to its counterpart
Delay in work and loss of reputation in the eyes of the employer due to more damage/failure than expected due to insufficient quality
Spare parts consumption
Maintenance and Approval cost
Energy consumption
License and Subscription
Training and Adaptation/Orientation
Software update
Operation and Support
Residual value
Renewal
Resources
Total Cost of Ownership: How it's calculated with Example
What is total cost of ownership (TCO)?
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